The New Economy The New Economy vs The Old Economy
The New
Economy is globalized in nature, with fast paced market dynamics. Hyper competition, varying technologies and the empowered customer challenge companies constantly into changing their strategies. The New Economy is spurred by the digital revolution and the advances in the field of IT. Organized by customer segments, the new economy focuses on Customer Lifetime Value in the background of the Marketing Scorecard. While performance builds brands, the emphasis is to retain
customers rather than acquire them. Organizations under promise and over deliver while measuring customer satisfaction critically.
The Old Economy was born after the Industrial Revolution and centered on the manufacturing
industries. Products were standardized to bring down costs and customized service was not a priority. Market Size was on constant expansion with the aim to achieve economy of scale. Procedures and policies were affected by the geography of the market and the managing hierarchy within the organization. The Old Economy was organized by product units, keeping in mind profitable transactions and the financial scorecard. It was not yet realized that it is far easier to hang on to ready customers rather than acquire new ones. Brand Building was basically an advertising portfolio.
The Major Drivers Of The New Economy Digitalization and Connectivity : Most devices were operated by analog information wherein a continuous variable picked up values in a given range. Digital information, which can convert any data (Text/ Sound/ Image) into dichotomous 0,1 binary numbers, forms the pathway for the operations of today’s systems. Wireless Communication and high velocity connectivity on the Information Highway (Internet) is a certain boost. While Intranets connect people within a group, extranets connect an organization with its supplier/ vendor/ distributor base.
Disintermediation and Reintermediation : As the digital revolution set in countless entrepreneurs went online while some could not acclimatize to the change in circumstances. Disintermediation took place as conventional retailing gave way to e tailing. Online selling was soon facilitated by online middlemen as subsequent reintermediation came into effect.
Customization and Customerization : In the old economy, manufacturing industries standardized production and promotion in the same breath in an effort to run the business like a well oiled appliance. However in the new economy, information about individual customers gained priority as production became differentiated to suit the individual requirement of each client giving rise to a phenomenon called customization. Customerization was created while merging the operational and marketing needs of a company as it customized its product/ service mix.
Convergence of Industries : Companies realized that maximum synergy lies at the intersection of two related fields as cartoons and theme parks extended to films and education and pharmaceuticals discovered cosmetics.
Swapna Datta Khan
ICFAI National College